Advanced Search
MyIDEAS: Login to save this article or follow this journal

Asset Pricing under the Quadratic Class

Contents:

Author Info

  • Leippold, Markus
  • Wu, Liuren

Abstract

We identify and characterize a class of term structure models where bond yields are quadratic functions of the state vector. We label this class the quadratic class and aim to lay a solid theoretical foundation for its future empirical application. We consider asset pricing in general and derivative pricing in particular under the quadratic class. We provide two general transform methods in pricing a wide variety of fixed income derivatives in closed or semi­closed form. We further illustrate how the quadratic model and the transform methods can be applied to more general settings.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://journals.cambridge.org/abstract_S0022109000001460
File Function: link to article abstract page
Download Restriction: no

Bibliographic Info

Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 37 (2002)
Issue (Month): 02 (June)
Pages: 271-295

as in new window
Handle: RePEc:cup:jfinqa:v:37:y:2002:i:02:p:271-295_00

Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_JFQProvider-Email:journals@cambridge.org

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gregory R. Duffee, 2002. "Term Premia and Interest Rate Forecasts in Affine Models," Journal of Finance, American Finance Association, American Finance Association, vol. 57(1), pages 405-443, 02.
  2. Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
  3. Michael W. Brandt & Amir Yaron, 2003. "Time-Consistent No-Arbitrage Models of the Term Structure," NBER Working Papers 9458, National Bureau of Economic Research, Inc.
  4. David K. Backus, 2001. "Affine Term Structure Models and the Forward Premium Anomaly," Journal of Finance, American Finance Association, American Finance Association, vol. 56(1), pages 279-304, 02.
  5. Markus Leippold & Liuren Wu, 1999. "The Potential Approach to Bond and Currency Pricing," Finance, EconWPA 9903004, EconWPA.
  6. Tomas Björk & Bent Jesper Christensen, 1999. "Interest Rate Dynamics and Consistent Forward Rate Curves," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 9(4), pages 323-348.
  7. David K. Backus & Chris I. Telmer & Liuren Wu, 1999. "Design and Estimation of Affine Yield Models," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2000-E17, Carnegie Mellon University, Tepper School of Business.
  8. Backus, David & Foresi, Silverio & Mozumdar, Abon & Wu, Liuren, 2001. "Predictable changes in yields and forward rates," Journal of Financial Economics, Elsevier, Elsevier, vol. 59(3), pages 281-311, March.
  9. L. C. G. Rogers, 1997. "The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 7(2), pages 157-176.
  10. Markus Leippold & Liuren Wu, 2002. "Design and Estimation of Quadratic Term Structure Models," Finance, EconWPA 0207014, EconWPA.
  11. Constantinides, George M, 1992. "A Theory of the Nominal Term Structure of Interest Rates," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 5(4), pages 531-52.
  12. Bates, David S., 2000. "Post-'87 crash fears in the S&P 500 futures option market," Journal of Econometrics, Elsevier, Elsevier, vol. 94(1-2), pages 181-238.
  13. Chacko, George & Viceira, Luis M., 2003. "Spectral GMM estimation of continuous-time processes," Journal of Econometrics, Elsevier, Elsevier, vol. 116(1-2), pages 259-292.
  14. Yacine Ait-Sahalia, 1995. "Testing Continuous-Time Models of the Spot Interest Rate," NBER Working Papers 5346, National Bureau of Economic Research, Inc.
  15. Pfann, Gerard A. & Schotman, Peter C. & Tschernig, Rolf, 1996. "Nonlinear interest rate dynamics and implications for the term structure," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 149-176, September.
  16. Conley, Timothy G, et al, 1997. "Short-Term Interest Rates as Subordinated Diffusions," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(3), pages 525-77.
  17. Dong-Hyun Ahn & Robert F. Dittmar, 2002. "Quadratic Term Structure Models: Theory and Evidence," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(1), pages 243-288, March.
  18. David A. Chapman & Neil D. Pearson, 2000. "Is the Short Rate Drift Actually Nonlinear?," Journal of Finance, American Finance Association, American Finance Association, vol. 55(1), pages 355-388, 02.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:37:y:2002:i:02:p:271-295_00. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.